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Why is e-commerce so successful?
Lately Western luxury brands have launched their own campaign in Asia with the intention to sell their goods in mainland China. The sales of these luxury brands are consistently increasing. As a result, that the domestic sales and the sales in overall Asia has halted.
Form this information we can see that the Chinese consumers prefer to buy their goods from a luxury brand online rather than purchasing a product of a store in China. In other word the luxury brands are taking more and more control on the online platform. We can also conclude that luxury e-commerce market in China is evolving and that this industry will mature in 2018.
An example of brands who targeted this new group of consumers are Gucci and Louis Vuitton. They have launched their own e-commerce stores to sell their wide assortment of goods directly to customers in China.
Other brands like Calvin Klein and Ralph Lauren are planning to invest min the online e-commerce market of China and to work with well-known Chinese influencers. Not only are they willing to do this, there are also plans to build more physical stores, so they have a bigger presence in China and will be recognized by the consumers. “Consumers in China got accustomed to making big purchases online much faster than the rest of the world and luxury brands needed to start thinking more about how to take advantage. I think that’s what we saw happen this year,” said Xia Ding, president of JD.com’s fashion business.
The biggest e-commerce competitors
Today the biggest e-commerce players in China are Tmall and JD.com. They are dominating the Chinese online consumer market and have a fierce competition to win over as many luxury brands as possible.
During the Chinese Singles’ Day Alibaba’s consumer were offered special promotion from luxury brands like Burberry, Tag Heuer and Rimowa. Even the digitally shy Céline created a WeChat account to attract to Chinese customers on the social app.
Entering the Chinese consumer market creates a lot of opportunities for a brand but in the beginning, it is definitely a challenge to entice the Chinese consumers.
Data of Farfetch, a company that sells inventory from 800 brands and boutiques, took an investment of $300 million from JD.com and formed a partnership with the intention to operate directly in China. Besides that, L2’s data shows the percentage of fashion brands available through Farfetch in China. It shows that Farfetch has increased from 76 percent in 2016 and in this year a noticeable 85 percent. And Farfetch is not the only company that has a substantial growth, Yoox increased from 72 to 78 percent and Net-a-Porter rose from 48 to 57 percent.
A report of Bain & Co shows that 30 percent of the world’s luxury purchases are made by Chinese customers. Despite that only 7 percent of those are made in China self. Because of the fact that Chinese consumers rather buy luxury goods online than in domestic stores. Overall, we can see that Chinese consumers are purchasing more luxury goods like never before and that the sales of luxury bands will grow online as domestically.
A consequence of this evolvement is that high-end brands have to deal with counterfeiters. What it boils down to it that some counterfeiters want to enjoy the same success as the luxury brands. As respond to that luxury brands have confronted the counterfeiters head-on, in order to stop counterfeiters of making a name for themselves. “Luxury brands are finally responding to the hard reality that their goods are being sold online in China, regardless of whether or not they authorize it,” said Liz Flora, the editor of Asia Pacific research at L2. “If a brand doesn’t have its own online sales presence in China, it is basically handing over the digital shopping experience to grey-market and third-party sellers.”
For example, luxury brand Richemont has cleaned up its inventory in China in order to start with a blank slate where the group’s brands, including Piaget and Cartier, can own their sales channels.
Other brands, such as: Ralph Lauren, Louis Vuitton and Gucci, have collaborated with e-commerce platform Alibaba to prevent counterfeiters to sell on the platform.
E-commerce battleground of JD.com, Alibaba and WeChat
As the Chinese market is a new environment for many brands, luxury brands are collaborating with JD.com and Alibaba. They are both known as huge e-commerce platforms and in this manner, they will build a shopping paradise for big-spenders.
In addition to that, JD.com and Farfetch collaborated and created the luxury platform Toplife. Alibaba established on his turn the Luxury Pavilion which is only for invited brands and consumers. The role of these platforms is helping newcomers to adjust to the Chinese market and consult them.
At the same time, luxury brands are testing what WeChat has to offer. The app has 900 million users and is best used for luring consumers to make a purchase in store. Luxury brands such as: Cartier, Céline and many more, have also used this platform to sell directly to their target group in WeChat.
Shopping experience of 2018
The main goal of 2018 for luxury brands is to maintain the quality of the online shopping experience, whether they see the brand on WeChat, JD.com or Alibaba.
Therefore, it’s important to provide consumers with good features like online appointment booking and delivery. JD.com offers one of best features with their same-day delivery, which makes the consumers very pleased. “The Chinese customers are very resourceful. The ultimate goal is to get the product into the hands of JD.com clients. The capability is beyond our own imagination, let alone capability. They can reach millions of clients the next day in all cities in China, which is something I’m not able to even comprehend”, Phillip Lim CEO.
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